Make information services pay its way

Allen, Benjamin J.

doi:10.1016/0024-6301(87)90184-1

Cited by 14 publications

(24 citation statements)

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“…Prior studies argued that prices that were understandable, usage-based, and presented to accountable individuals could simulate a market environment which would control the supply and demand for IT services (Allen, 1987;Bergeron, 1986b;Nolan, 1977b). This study revealed that even when business unit managers understand their charges and how to reduce those charges, they feel unable to influence the supply of IT services.…”

Section: Discussionmentioning

confidence: 99%

“…Enthusiasts claim that a profit center arrangement can boost IT efficiency and enhance IT and business communication about services and costs (Allen, 1987). The profit center, however, is not a partnership tool, in that it makes the IT unit's primary concern its bottom line results.…”

Section: Implications For Practicementioning

confidence: 99%

“…In the IT literature, the concept of optimal IT economic decisions is often equated with reduced resource consumption (Bergeron, 1986a;1986b;Drury, 1982;McKell et al, 1979;Nolan, 1977b) even though Eccles (1985) notes that transfer prices can improve economic decisions by influencing both the supply of and demand for products and services. Some researchers have argued chargeback should make the IT unit more accountable for service cost and quality (Allen, 1987;Choudhury, Sricar and Venkata;1986;Olson and Ives, 1982) but there is no empirical evidence of this outcome.…”

Section: S~mentioning

confidence: 99%

“…Like other-transfer pricing schemes, IT chargeback has been shown to impact economic decisions (Allen, 1987;Bergeron, 1986a;Dewan, 1996;Drury, 1982;McKell, Hansen, and Heitger, 1979;Mendelson, 1985;Smidt, 1968). By exposing the costs of IT-related services, chargeback can promote thoughtful assessment of the relative importance and usefulness of IT applications, thereby contributing to more effective use (Nolan, 1977a, Olson andIves, 1982).…”

Section: S~mentioning

confidence: 99%

“…Ostensibly intended to allocate costs for accounting purposes, chargeback is widely believed to have the potential to encourage wise decision-making on IT investment and use (Allen, 1987;Bergeron, 1986b;Nolan, 1977b), but there is little agreement as to the conditions under which chargeback can deliver on this potential (Butler, 1992;Drury, 1982;McKell, Hansen and Heitger, 1979). Moreover, there is some evidence that chargeback exacerbates tensions between the IT unit and its clients (Nolan, 1977a;Olson and Ives, 1982).…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

The Untapped Potential of IT Chargeback

Ross¹,

Vitale²,

Beath³

1999

MIS Quarterly

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IT chargeback is generally regarded as a necessary evil in which central IT costs are, as accurately as possible, divided among the business units that benefit from them. In this study of IT chargeback practices at ten large U.S. firms, we found that IT chargeback had the potential to be a valuable management tool. We observed three approaches to chargeback that differed according to their objectives, their policies regarding sourcing and level of accountability, and their administrative processes. While all three approaches led to cost reduction efforts by chargeback statement recipients, they had different impacts on business unit attitudes toward the IT unit. In particular, we found that chargeback could facilitate useful discussions between the IT unit and business units about business priorities and the value of IT services. In most cases, however, chargeback, while encouraging business unit managers to manage the demand for IT services, left them questioning whether the IT unit was effectively managing the supply of those services. Based on these findings we offer recommendations as to how firms can design chargeback systems that will generate positive attitudes and economic returns. Pages

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Section: Discussionmentioning

confidence: 99%

Section: Implications For Practicementioning

confidence: 99%

Section: S~mentioning

confidence: 99%

Section: S~mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Untapped Potential of IT Chargeback

Ross¹,

Vitale²,

Beath³

1999

MIS Quarterly

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Management and organization principles for the information economy

Davidson¹,

Davis

1990

Human Resource Management

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lndustrial era management models are giving w y to a new paradigm. The widespread application of information technology is driving change in underlying business processesand market structures. The impact of such change on management and organiurtion models is only beginning to be felt, but certain principles and directicms are becoming apparent. This article describes the mainstrmm elements of the emerging business p r adigm and discusses a series of implications for the human resource management function.The industrialization of Western economies spanned more than one and one-half centuries. During this period, industrial technologies and concepts, such as product standardization and mass production, permeated virtually all sectors of economic activity. In tum, traditional industrial logic is now being displaced by the new technologies and management concepts of the information economy.The expanding use of information technology stimulates innovation in business practices and organization models. Information technology is driving a shift from mass production to mass customization, for example. Traditional organizational concepts, such as hierarchical communication, span-of-command, boundaries, and vertical integration are also being displaced by new practices and structures. These new structures will present sigdicant human resource management challenges. Interorganizational staffing, training, and development requirements will rise sharply. Job descriptions and compensation systems will need to become much more flexible. Team-building will likely become more dynamic and more central to all organizations. The management of outsourcing relationships will also become an important role for HR executives. But even more important than these discrete functions, the HR community can assist in managing the broader transformation of today's organizations.As the growing wave of business innovations are focused and refined, a new set of dominant management and organization prinaples will arise. The widespread application of these new models will drive the "informationalization" of the economy, a process that will occur over Having on hand twice the material as is needed is precisely the same as hiring two men to do the job that one man ought to do. Hiring two men to do the job of one is a crime against society.

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Organizational Structure for the IT Department: Profit Center or Cost Center?

Vithayathil

Choudhary

2022

Inf Syst Front

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Why do some firms organize their IT departments as profit centers whereas other firms organize IT as a cost center? These commonly employed organizational structures are characterized by information asymmetry and decision rights afforded to the IT department. The complexity of IT and its ongoing rapid evolution lead to information asymmetry where the IT department has private information about technology and cost, and the consuming departments have private information about demand. Under the cost center organizational structure, the firm sets the quality and number of IT services offered by the IT department. Whereas under a profit center structure, the IT department makes decisions on quality, price and variety of IT services. We find that the quality of IT services under the cost center decreases with greater uncertainty in demand for IT services. We also find that the cost center structure can offer higher quality IT services than the profit center structure, and consumption of IT services can be higher under the profit center structure. The preferred organizational structure does not always provide greater variety of IT services than the alternate structure. The cost center is preferred when the marginal cost of IT services is sufficiently low, or the fixed cost of quality is sufficiently high.

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Make information services pay its way

Cited by 14 publications

References 0 publications

The Untapped Potential of IT Chargeback

The Untapped Potential of IT Chargeback

Management and organization principles for the information economy

Organizational Structure for the IT Department: Profit Center or Cost Center?

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